Levelling the legal playing field

As with most legal cases in most jurisdictions, proceedings can prove time-consuming and costly for both parties involved. But new legislation has armed the courts in the Dubai International Financial Centre (DIFC) with the ammunition to handle a wider scope of disputes for a reduced fee. With less than six months since its inception, SMEs are fast emerging as the biggest beneficiaries of this Small Claims Tribunal (SCT). Mike Byrne brings you the breakdown.

Even with a quick glance over the sections of the new legislation, Law No. 16 of 2011, has SME written all over it; the SCT in essence opens the courtroom doors to the general public so long as the parties “opt in” to the DIFC Courts’ jurisdiction by agreement in writing.

Ghada Qaisi Audi, Head of Disputes Resolution, Fichte & Co Legal explained to SME Advisor: “The DIFC Courts’ SCT recently decided a case between two Dubai-based parties that had no connection to the DIFC to settle a matter concerning the non-payment of an invoice. So long as the parties agree in writing, the SCT can hear any civil and commercial claims up to AED 500,000 (such as contract claims and debt collection matters) and employment claims without a cap on the amount in dispute.”

The Small Claims Court was originally set up in 2007 but was more limited than in its current form. It was ruled under the common law system and was held in English. Before 2009 the cap on the top ceiling monetary amount that could be considered was AED 100,000 and companies had to be registered as operating within the DIFC. In 2009 this monetary cap was raised to AED 500,000.

Under the newly passed legislation employment disputes amounting up to AED 2000,000 can be heard, but there is potential for the court to waive this cap if both parties agree in writing and the judge rules this to be beneficial for both parties involved.

In its current form, the SCT is conducted with the aid of eight judges, two of which are Emirati and the remaining six are chosen from various common law jurisdictions from across the globe. Decisions are binding and hold the same weight of authority and enforcement as domestic court rulings, with the freezing of bank accounts and assets as possible imposition tools at the court’s disposal. The DIFC Courts also work very closely with Dubai Courts and a Joint Committee meets regularly to discuss issues such as joint lectures, Memorandums of Understanding (MoUs) and enforcement.

How it all works

So what is the process from start to finish and within what time scale can SMEs hope to have the dispute settled? “The SCT provides a speedy and efficient forum, in English, that is confidential and binding on the parties. Lawyers are not permitted to participate and the first step is a ‘consultation’ where the parties sit before a Small Claims Tribunal Judge, who assists the parties to come to an agreement. More than 90% of the cases are settled amicably by a Consent Order in the first consultation with an SCT Judge and within three weeks from the date the claim is lodged with the DIFC Courts,” says Ghada.

Indeed it is perhaps the absence of legal counsel that affords both parties and the judge to participate in a more direct manner to resolve the matter. According to Small Claims Tribunal Judge, Shamlan Al Sawalehi, small claims litigants can expect the SCT judge to take an active role to assist the parties to agree. “It is the process such as asking questions, getting the parties to consider their options and whether it is in their best interest to settle. Sometimes the parties need to let out their emotions, but then they realise the benefit of making a settlement because they actually want to continue working with the other party, for example,” he said.

So what has been the response to the new court’s powers of decision making? Amna Sultan Al Owais, Deputy Registrar and SCT Registrar told SME Advisor that the most common cases are in the instance of employee versus employer and involve an issue of payment. “If the dispute is not resolved in the consultation stage, the case continues to a second step, a ‘hearing’ before another SCT Judge that will take place a week later, and with the judge rendering an Order,” she notes. Amna also pointed out that all judgements and rulings are available as public record and it is only in the most rare of circumstances that that the court is closed to the public.

FACTS AND FIGURES

Small Claims Tribunal

No. of cases

2011 – 83

2010 – 81

2009 – 66

2008 – 54

Court of First Instance

No. of cases

2011 – 31

2010 – 27

2009 – 36

2008 – 9

Court of Appeal

No. of cases

2011 – 2

2010 – 4

2009 – 2

2008 – 1

Indeed, according to Judge Al Sawalehi, many SME’s stand to gain from the new rules because the fees are low, the process is very quick and confidential and the outcome is a binding Court order that can be enforced against the other side if they do not pay immediately. “When it comes to enforcement practices, the general rule is that people take a court Order seriously and pay it within the prescribed timeframe. In case they do not, the winning party can take it to enforcement to have the losing party’s assets seized in order to pay off the amount,” he says.

However, there are certain points to keep in mind, notes Ghada. “While it is true that parties can file their claims before the DIFC Courts SCT without legal representation, when the disputed amount is towards the high end of the cap, it is still suggested that companies consult with a lawyer before approaching the DIFC Courts to avoid any disappointment,” she says.

According to Ghada, a lawyer will in fact be able to give preliminary advice and assistance on the correct procedures to follow, and in particular advise on:

• Determining whether your claim or counterclaim can be brought in the SCT

• Drafting forum selection clauses in new and existing Agreements

• Lodging the claim and following up with the DIFC Courts

• Preparing for the consultation and hearing

Appealing the decision to the Court of First Instance (see text box for further details)

• Enforcing an SCT Order

Pro Bono Clinic

In addition to the developments of the SCT, Amna told SME Advisor of the recent launch of the Pro Bono Clinic, whereby people seeking legal advice and guidance, but who are unable to pay a fee for a consultation, can avail of the services and expertise from some of Dubai’s finest legal counsel.

“The Pro Bono programme (for the Court of First Instance) was the first of its kind in the Middle East. It had its first session on the 16th February where attendees were able to book free appointments and sit with a lawyer from one of the international volunteer firms participating, for free and confidential advice,” she said.

Those seeking this service must fill out a criteria form and are then assessed. The DIFC Courts do point out that they are part of the selection process but do remain neutral insofar as the advice afforded to successful applicants by lawyers from the 23 local and international firms participating in the scheme.

The clinic is also exclusive to those companies and employees registered and operating within the DIFC, but precedent case law suggests that if a party has a presence in the DIFC but the dispute originates from outside, then, as long as both parties agree, a judge can grant permission to have the wishes of the parties upheld.

Without doubt, both the SCT and the Pro Bono Clinic programme, are both very progressive legal developments that best

SMALL CLAIMS TRIBUNAL COSTS

– When filing a claim related to an employment dispute, the fee for filing will be 2% of the value of the claim, with a minimum of AED 200. Any claim relating to an employment dispute that must be referred to the Court of First Instance (CFI) will incur a further 1% of the value of the claim with a minimum of AED 100.

– The filing fee for all other claims (non-employment related) in the SCT is 5% of the claim value or a minimum of AED 500. Any claim related to a non-employment dispute that must be referred to the CFI will incur a further fee of 2.5% of the value of the claim of a minimum of AED 250.

– The SCT Registrar will be able to waive, defer or reduce any fees it deems appropriate.

COMMENCEMENT, RESPONSE AND APPEAL TO A CLAIM

- In order to lodge a small claim, the claimants must submit a P53/01 form to the Registry. The form is available on the DIFC Courts Website, www.difccourts.ae. The DIFC Courts’ Registry will serve the claim form on the defendant.

– The SCT requires that the claimant to provide both the claimant’s and defendant’s full contact information to include name, address, e-mail address, telephone number and fax number. The claimant must also provide a full summary of the dispute, what compensation is expected to receive and the justification for seeking compensation. The monetary value of the claim must also be included. If the dispute is employment related, a photocopy of the employment contract and/or offer letter is required.

– The defendant must respond to the claim within seven days of it being served and must either admit the claim, file a defence to the claim, or complete an application to dispute jurisdiction.

– An intending appellant must file an appellant’s notice on Form 53/02 within 14 days after the date of the decision. The form is available at www.difccourts.ae.

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